Those experienced in conducting business in North Asia will tell you that relationship building is paramount to a successful business outcome. Relationship building in Asia is often in direct contrast to standard business practices expected in Anglo-Western cultures such as North America, Australia and the UK. These business practices will effect the way negotiations are conducted, and so when you are negotiating in Asia it is important to consider the differences from your standard negotiation protocols. The Anglo-Western negotiation protocol is generally more direct and task focussed, ensuring that negotiation discussions are conducted primarily in a formal context, building relationship is not really required outside of the functionality of the deal. In North Asia, such as China, Japan and South Korea this direct task orientated approach is at odds with the accepted relationship building process which helps to build trust or Guanxi. Without trust, there is no relationship, and consequently no successful negotiation outcome.
In Indonesia, you would think that because it is part of “Asia” that it is safe to assume that relationship building would also be of great importance to the successful negotiation outcome. However past research has found that Indonesia exhibits strong performance orientation, suggesting that negotiations are more task orientated and potentially less focussed upon relationship building. Recent research investigating Indonesian negotiation behaviour has however, identified elements of both relationship building and also task orientation which would suggest that both assumptions were correct in an Indonesian context, and that relationship building in the negotiation process in Indonesia is unique in Asia.
This research describes the negotiation process consistently as one which starts with a task orientation and moves towards a relationship building orientation. Initial negotiation meetings are often conducted with technocrats and lower level managers who discuss the specific technical requirements of the International negotiating partner. This task orientated negotiation component is similar to the negotiation protocols expected in Anglo-Western cultures, and is equally compatible with the performance orientated findings of past studies. However, this task orientated component of the negotiation does not seem to be vitally important from an Indonesian perspective, and appears to be conducted purely to appease “western” expectations. This may be due to many senior Indonesian managers being university educated in western countries such as US, UK and Australia, and so learning Anglo-Western negotiation norms and expectations. Indonesian negotiators use this initial task orientated discussion as a way to maintain harmony in the negotiations, by giving western negotiators what they want i.e. Functionality and task orientated discussion. The Indonesian negotiators allow the negotiations to run to this familiar western format, before the negotiations return to familiar and more comfortable ground for the Indonesian negotiator. How is this done?
Once the initial meetings have been conducted with the technocrats, the senior Indonesian executives and decision makers will then enter the negotiation, and this is when the negotiation atmospherics will ultimately change to reflect more relationship building. The negotiation team on the Indonesian side will then often change its composition and this is when the executives enter the negotiations, with the technocrats either reducing in number or no longer attending the meetings. In addition to the change in the negotiation team composition, there is also often a change in the meeting environment, as the face to face negotiations move to more informal environments such as restaurants and hotel lobbies. If the negotiation is moving towards a successful outcome then it is more likely that the meeting environment will change to further informal environments and possibly result in a meeting with the family. Once you meet the family you are a long way towards reaching your desired goal of achieving a successful business deal.
So when you do business in Indonesia, remember that you must be concerned with building the relationship, regardless of how technical the meetings originally appear. Ultimately the stronger the inter-personal relationship the stronger your business deal will become.
Dr Nathan Gray is Managing Partner of AsiaAustralis – a strategic management advisory firm that specialises in markets throughout Asia. Over the past three decades our consultants have assisted companies achieve their market objectives in Asia.